GBP/USD: week of losses (video)
By Kira Iukhtenko, FBS
GBP/USD failed to overcome the $1.7200 resistance this week. The cable has been declining for 8 days in a row after peaking at $1.7190 on July 15. On Thursday the price fell below the psychological $1.7000 support.
Premature rate hikes have already been priced in, but this week the hawkish expectations contracted. Despite the fact that inflation has almost reached the Bank of England’s target of 2% in June and the labor market conditions improved significantly in the recent months, this week the BOE made it rather clear that interest rates will rise only after the wage growth accelerates. Annual earnings growth is now only at 0.7%, what is far below the current CPI (1.9%). What’s more, the regulator expects the UK economic growth to slow down on H2 2014. UK Q2 GBP came unchanged in line with forecast at 0.8% on Friday. The figure is not so weak, but not enough to support the falling pound.
Weekly close below $1.7000 will be a strong bearish confirmation and open the way to $1.6950 (100-month MA, 55-day MA). This is the bullish channel support, so a break below here would pave the ground to further losses. Next support lies at $1.6900, $1.6880, $1.6800 and $1.6700. The picture remains bearish as long as the pair trades below the $1.7200 mark.
Next week the UK economic calendar is not so intense – watch the July Manufacturing PMI.